It's lunchtime at Shelbyville High School, 30 miles southeast of Indianapolis, Ind., and more than 100 teenagers are buzzing over trays in the cafeteria. Like high schoolers everywhere, they have arranged themselves by type: jocks, preps, cheerleaders, dorks, punks and gamers, all with tables of their own. But when they are finished chugging the milk and throwing Tater Tots at one another, they will drift out to their classes and slouch together through lessons on Edgar Allan Poe and Pythagoras. It's the promise of American public education: no matter who you are or where you come from, you will be tugged gently along the path of learning, toward graduation and an open but hopeful future.

Shawn Sturgill, 18, had a clique of his own at Shelbyville High, a dozen or so friends who sat at the same long bench in the hallway outside the cafeteria. They were, Shawn says, an average crowd. Not too rich, not too poor; not bookish, but not slow. They rarely got into trouble. Mainly they sat around and talked about Camaros and the Indianapolis Colts.

These days the bench is mostly empty. Of his dozen friends, Shawn says just one or two are still at Shelbyville High. If some cliques are defined by a common sport or a shared obsession with Yu-Gi-Oh! cards, Shawn's friends ended up being defined by their mutual destiny: nearly all of them became high school dropouts.

Shawn's friends are not alone in their exodus. Of the 315 Shelbyville students who showed up for the first day of high school four years ago, only 215 are expected to graduate. The 100 others have simply melted away, dropping out in a slow, steady bleed that has left the town wondering how it could have let down so many of its kids.

In today's data-happy era of accountability, testing and No Child Left Behind, here is the most astonishing statistic in the whole field of education: an increasing number of researchers are saying that nearly 1 out of 3 public high school students won't graduate, not just in Shelbyville but around the nation. For Latinos and African Americans, the rate approaches an alarming 50%. Virtually no community, small or large, rural or urban, has escaped the problem.

There is a small but hardy band of researchers who insist the dropout rates don't quite approach those levels. They point to their pet surveys that suggest a rate of only 15% to 20%. The dispute is difficult to referee, particularly in the wake of decades of lax accounting by states and schools. But the majority of analysts and lawmakers have come to this consensus: the numbers have remained unchecked at approximately 30% through two decades of intense educational reform, and the magnitude of the problem has been consistently, and often willfully, ignored.

That's starting to change. During his most recent State of the Union address, President George W. Bush promised more resources to help children stay in school, and Democrats promptly attacked him for lacking a specific plan. The Bill & Melinda Gates Foundation has trained its moneyed eye on the problem, funding "The Silent Epidemic," a study issued in March that has gained widespread attention both in Washington and in statehouses around the country.

The attention comes against a backdrop of rising peril for dropouts. If their grandparents' generation could find a blue-collar niche and prosper, the latest group is immediately relegated to the most punishing sector of the economy, where whatever low-wage jobs haven't yet moved overseas are increasingly filled by even lower-wage immigrants. Dropping out of high school today is to your societal health what smoking is to your physical health, an indicator of a host of poor outcomes to follow, from low lifetime earnings to high incarceration rates to a high likelihood that your children will drop out of high school and start the cycle anew.

Identifying the problem is just the first step. The next moves are being made by towns like Shelbyville, where a loose coalition of community leaders and school administrators have, for the first time, placed dropout prevention at the top of the agenda. Now they are gamely trying to identify why kids are leaving and looking for ways to reverse the tide. At the request of a former principal, a local factory promised to stop tempting dropouts with jobs. Superintendent David Adams is scouting vacant storefronts for a place to put a new alternative high school. And Shelbyville's Republican state representative, Luke Messer, sponsored a bill, signed into law by the Governor two weeks ago, that will give students alternatives to traditional high school while imposing tough penalties on those who try to leave early without getting permission from the school district or a judge.

Shelbyville, a town of almost 18,000 located on the outer fringe of the "doughnut" counties that ring Indianapolis, seems an unlikely battleground in the war on dropouts. Despite a few oddities--it's home to both the oldest living Hoosier and the world's tallest woman--it is an otherwise pleasantly unremarkable town. The capital is just a short drive away, but miles of rust-colored farmland, mainly cornfields waiting for seed, give the area a rural tinge. Most people live in single-family houses with yards and fences. Not many of them are very well off, but there's little acute poverty, as a gaggle of automotive and other factories has given the town a steady supply of well-paying jobs. Violent crime is rare, and the town is pervaded by a throwback decency. People wave at one another from their cars on Budd Street. They chitchat in the aisles of Mickey's T-Mart grocery store.

For years, Shelbyville had been comforted by its self-reported--and wildly inaccurate--graduation rate of up to 98%. The school district arrived at that number by using a commonly accepted statistical feint, counting any dropout who promises to take the GED test later on as a graduating student.

The GED trick is only one of many deployed by state and local governments around the country to disguise the real dropout rates. Houston, for example, had its notorious "leaver codes"--dozens of excuses, such as pregnancy and military service, that were often applied to students who were later reclassified as dropouts by outside auditors. The Federal Government has been similarly deceptive, producing rosy graduation-rate estimates--usually between 85% and 90%--by relying only on a couple of questions buried deep within the U.S. Census Bureau's Current Population Survey. The survey asks whether respondents have a diploma or GED. Critics say the census count severely underreports dropout numbers, in part because it doesn't include transients or prisoners, populations with a high proportion of dropouts.

In 2001, Jay Greene, a senior fellow at the Manhattan Institute, published a study that peeled back the layers of statistical legerdemain. Poring over raw education data, he asked himself a basic question: What percentage of kids who start at a high school finish? The answers led Greene and subsequent researchers around the country to place the national graduation rate at anywhere from 64% to 71%. It's a rate that most researchers say has remained fairly static since the 1970s, despite increased attention on the plight of public schools and a vigorous educational-reform movement.

Starting a year ago, the people of Shelbyville began to admit the scope of their problem by asking themselves the same simple questions about who was graduating. It helped that superintendent Adams was new to his job and that the high school's principal was too. They had a clean slate and little incentive to make excuses for the old way of doing things.

THE PUSHOUT

Sarah Miller, 28, was victim of those old ways. An intelligent but rebellious teenager with a turbulent home life, Sarah began falling behind in attendance and classwork her freshman year. Like many other 15-year-olds, she had a talent for making poor decisions. She and her friends would often skip out of school after lunch and cruise up and down Broadway. Teachers rarely stopped them, but school authorities knew what she and her friends were up to. One morning Sarah went to the school office to discuss getting back on track but got a surprise. One of the administrators asked her point-blank, "Why don't you just quit school?" "I was just a kid," says Sarah with a laugh. "It was like they said the magic words. So I told them, 'O.K.!' And I left."

Sarah never set foot in a high school again. She got her GED, but now she's too afraid to try community college, she says, because she doesn't want to look stupid. Although she has a house she owns with her husband and a fine job serving coffee, biscuits and small talk at Ole McDonald's Cafe in nearby Acton, Ind., Sarah is not without regret. "It would have been nice to have someone pushing me to stay," she says. "Who knows how things would have turned out?"

Researchers call students like Sarah "pushouts," not dropouts. Shelbyville High's new principal, Tom Zobel, says he's familiar with the mind-set. "Ten years ago," he says, "if we had a problem student, the plan was, 'O.K., let's figure out how to get rid of this kid.' Now we have to get them help."

But can educators really be faulted for the calculation, however cold, that certain kids are an unwise investment of their limited energies and resources? That question quickly leads to the much thornier issues of class and clout that shape the dropout crisis. The national statistics on the topic are blunt: according to the National Center for Education Statistics, kids from the lowest income quarter are more than six times as likely to drop out of high school as kids from the highest. And in Shelbyville, nearly every dropout I met voiced a similar complaint: teachers and principals treat the "rich kids" better. "The rich kids always knew how to be good kids," says Sarah in a more nuanced version of the same refrain. "So I guess it's natural the schools wanted to work with them more than with the rest of us." The poor kids, though, are exactly the ones who need the extra investment.

Shelbyville leaders hope to change the prevailing mentality. At a cavernous high school gym in nearby Columbus, I watched the boys' basketball sectional semifinal with Shelbyville mayor Scott Furgeson. The Shelbyville Golden Bears' 21-0 regular season record had turned the town's usual Hoosier hysteria into Hoosier histrionics. As his constituents cheered on the good kids--the lithe, clean-cut basketball players who were dominating Columbus North High School--Furgeson paused to think about the other kids. Before becoming mayor, he spent 22 years managing the local Pizza King franchise. Every year he had to hire up to 200 teenagers, many of them dropouts, just to keep 10 full-time positions staffed. Those teenagers, failing in life as they had failed at school, were often the children of people Furgeson had seen quit school when he was a student at Shelbyville High 25 years before. The dropout problem, he says, corrupts the community far beyond the halls of the high school. "I worry that we're creating a permanent underclass," he says.

John Bridgeland, CEO of the Washington-based public-policy firm Civic Enterprises, says it's that type of attitude shift, more than legislation, that is likely to lead to change. Messer's 2005 bill made Indiana one of six states in the past five years to raise its minimum dropout age to 18 from 16. (Twenty-three states still let kids drop out at the younger age without parental consent.) Bridgeland, who co-wrote the Gates Foundation--funded report, supports the age hike but warns that states can't legislate in a vacuum. "These laws have to be coupled with strong support from the school and the community," he says. Underlying that conviction is perhaps the most surprising finding of the Gates survey: just how few dropouts report being overwhelmed academically. Fully 88% said they had passing grades in high school. Asked to name the reasons they had left school, more respondents named boredom than struggles with course work.

THE RESTLESS ONE

Susan Swinehart, 17, was an honors student her freshman year. She also joined the yearbook staff and found that she loved selling the $300 full-page yearbook ads to local businesses like Rush Shelby Energy and Fat Daddy's restaurant.

But the social cauldron of high school weighed on her. She didn't get along with the cheerleaders on the yearbook staff. And her avid interest in Stephen King novels and TV shows about forensics earned her a false reputation, she says, as a glum goth girl. So she started ditching class, barreling through the Indiana countryside alone in her Dodge Neon, blasting her favorite song, The Ghost of You, by My Chemical Romance--a song, as she puts it, about missed opportunities and regret.

"I'd rather regret something I did," she says, eyes welling with tears, "than regret something I didn't do." For her, sitting in a classroom biting her tongue and waiting to graduate when college wasn't necessarily in her future was a form of inaction. Working, saving money, starting her adult life--that was taking the initiative.

In cases like Susan's, American public education may be a victim of its own ambition. Rallying around the notion that every child should be prepared for higher education, schools follow a general-education model that marches students through an increasingly uniform curriculum, with admission to college as the goal. But what happens when a 17-year-old decides, rightly or wrongly, that her road in life doesn't pass through college? Then the college-prep exercise becomes a charade. At Shelbyville High School, as elsewhere, the general-education model became an all-or-nothing game that left far too many students with nothing.

Two months ago, Susan told her mother Kathy Roan that she was dropping out. "I wanted to kill her," says Kathy. But Kathy had her own bitterness about Shelbyville High. Two decades earlier, she too had been angered by the indifference of the school. She dropped out as soon as she turned 16.

On Feb. 22, Susan's mother went to school with her to sign her out of high school. That night Susan applied for more hours at the Taco Bell where she worked and promptly stayed for the 5 p.m.--to--2 a.m. shift. The other women on the graveyard shift gave her hell for quitting school. They were mostly dropouts themselves, says Susan, who reminded her that even at fast-food chains, anyone who wants to advance needs a diploma or GED. She had, they told her, just broken something that could not be easily put back together.

Susan says she will prove them wrong. She has started a Pennsylvania-based correspondence course that both her mother and sister completed. For $985, it provides textbooks, online tests and teacher support via phone and e-mail. The rush to cash in on dropouts has made such correspondence courses and "virtual high schools" the Wild West of secondary education, a multimillion-dollar industry that can offer a valuable second chance but has suffered at times from poor oversight and a dizzying array of self-styled accrediting institutions, many of which aren't recognized by mainstream colleges.

There is, not surprisingly, partisan division over the dropout problem. Liberals say dropouts are either a by-product of testing mania or an unavoidable result of public schools' being starved for funding. But more conservative reform advocates, like Marcus Winters, a senior research associate at the Manhattan Institute, disagree. "Spending more money just has not worked," he says. "We've doubled the amount we spend per pupil since the '70s, and the problem hasn't budged."

In Indiana, however, there is a bipartisan consensus about the state's latest antidropout measure. Shelbyville representative Messer, former head of the Indiana Republican Party, is no stranger to partisan politics, but his strongest partner in pushing for the measure was a liberal Democrat named Stan Jones, who is now the state's commissioner of higher education. The bill they championed had, fittingly, both carrot and stick. Students who drop out before age 18 could have their driver's license suspended or their work permit revoked unless their decision was first approved by a school or judge. But students who found the high school environment stifling could take classes at community colleges. The dual approach struck a chord, and both houses passed the bill unanimously.

Messer acknowledges that his law is no panacea. He's fond of saying he can't legislate away teenage mistakes. And indeed, Kentucky, Georgia and West Virginia have had similar laws on the books for a number of years, but critics say there's no proof that the laws have worked. Still, he says, "some kids are dropping out because it's easy and it's O.K. That is going to change."

On a national level, No Child Left Behind--the metric-heavy school reform that President Bush would like to expand in public high schools--was designed to make schools accountable for their dropout rates. But it hasn't been carried out very seriously. The Education Trust, an advocacy group for low-income and minority students, issued a scathing report in 2005 about how the Federal Government stood by while states handed in patently misleading graduation numbers: last year three states didn't submit any, and for many states, the figures were clearly inflated.

Secretary of Education Margaret Spellings tells TIME that much is being done to get better data on dropouts. She points to the National Governors Association resolution last year to set, for the first time, a common definition of a dropout that all states will use to report graduation rates to the Federal Government. But it's a nonbinding compact. And critics say the government is trying to slash funding for important support programs, including the Carl Perkins Act, which has funded vocational education across the country since 1984. Spellings says President Bush has proposed converting Perkins and other support programs like GEAR UP and Upward Bound into block grants for states to choose their own fixes. As long as states get results, says Spellings, "we're not going to prescribe particular programs or strategies like vocational education."

Superintendent Adams believes he has come up with the right prescription for Shelbyville. The high school has established a credit lab, a sort of open study hall that lets at-risk kids recover credit from classes that they have failed. The principal at the elementary school is trying to identify at-risk kids in first grade. In the middle school, students are taking high school--graduation pledges, promising to be onstage with a diploma along with the rest of their class.

The district will also continue to support the Blue River vocational school, where more than 300 juniors and seniors spend their afternoons learning trades from nursing to marketing to auto-body repair. And there is a plan to build an alternative high school, which Adams envisions as a low-key place where, if they want to, kids can eat a doughnut while instant-messaging friends during loosely structured study hall, so long as they get their work done at some point. "Too many kids, at their exit interviews, say, 'I'm just done with this process--50 minutes, bell, 50 minutes, bell,'" says principal Zobel. "With the alternative school, I could give them an option, another environment to be in."

THE COMEBACK KID

On the edge of Shelbyville's Old Town square, now a roundabout with a paved parking lot in the middle, there's a statue of one of central Indiana's most famous literary characters, a sort of Hoosier Huck Finn named Little Balser. The main character of The Bears of Blue River, a book for adolescents set in the woods of frontier-era Shelby County, Balser spends his days striking off into the wilderness, slaying countless bears (and even an Indian or two) and worrying his parents sick. He is the prototype of an American teenager, a combustible combination of independence and irresponsibility.

Ryan Tindle, 21, carried that legacy to its modern-day extreme. In middle school, he started ditching class, trying to escape a tough home life by ingratiating himself with older kids who played rough. So it was little surprise when he traveled the well-worn path of the troublemaker, dropping out of high school and promptly beating up an older kid so severely that Ryan was sentenced to a year at Plainfield Juvenile Correctional Facility. Once inside, one of the few times he picked up a pencil, he used it to stab another inmate in the hand. He felt that he had to prove himself, he says, after witnessing weaker kids being assaulted at the facility. The attack earned him a stint in isolation in Cottage 13--"the cage"--and that, says Ryan, is where he got religion about schooling.

"My family always thought I was going to be worthless," he says, "and for the first time, I saw they were right."

As soon as he was released, Ryan went back to Shelbyville High School and asked to re-enroll. The Ryan Tindle that administrators knew, however, was nothing but grief. Wary administrators balked at letting him back in. He had to wait until a new principal arrived before he could convince the school that he was serious about his new leaf. But now he had to catch up quickly on a lot of lost years. "I went back with a fifth-grade education," he says. "That was the last time I had paid attention in school."

In the end, it took him nearly two years of a grueling schedule to finish what he started. From 7 a.m. to 3 p.m., he sat in class at the high school, then took three hours of night school for basic reading and math. To everyone's amazement, he finished.

Ryan is working hard these days. He wakes up before 5 every morning to go to his job at a car-parts factory, where he works on the line and earns less than $10 an hour. On Saturdays and Sundays, he trains new employees at the local Arby's. In all, he takes home about $23,000 a year. He would like to go to college someday, he says with a slightly embarrassed grin, to study criminology. He wants to be a cop.

For now, however, graduation is reward enough. He pulls a laminated card out of his wallet. It's his Shelbyville High School diploma, miniaturized. "I'll always be able to look at that diploma and smile," he says. "It's the best thing I've ever done."

If Ryan's redemption seems remarkable, that's because it is. According to a 2005 report from the Educational Testing Service, the company that runs the SATs, federal funding for second-chance programs, such as the night school Ryan attended, dropped from a high of $15 billion in the late 1970s to $3 billion last year. Yet the stakes in the struggle to get students to graduate are higher than ever: an estimated 67% of prison inmates nationwide are high school dropouts. A 2002 Northeastern University study found that nearly half of all dropouts ages 16 to 24 were unemployed.

Finding good work is only getting harder for dropouts in the era of the knowledge-based economy and advanced manufacturing. Knauf Insulation is Shelbyville's largest employer, with more than 800 workers. Salaries start at $16.50 an hour, and the benefits at this German company are, well, positively European. In one of its factories along the Blue River, a row of mammoth 2400° furnaces spin the plant's secret recipe of sand, soda ash, borax and limestone into billions of billowy glass fibers, which will be cooled, packed and cut into battens of fiber-glass insulation. The workers running the furnaces are the last of a dying breed: people holding good jobs who never earned a high school diploma. Thirty years ago, the men came from as far away as the hills of Kentucky and proved themselves steady workers. Today they earn as much as $60,000 a year.

It's a fine life, but these days high school dropouts need not apply. Even a GED is not sufficient for a job here anymore. Take a tour of the factory floor, and the main reason is clear. Some workers--entry-level employees--stand at their stations and pluck irregular pieces of fiber glass from the line. It's mostly mindless labor, but the giant whirring belts and chomping insulation cutters are run by adjacent computer terminals called programmable-logic controllers. When the floor boss goes on a coffee break, it's the floor workers who must operate the controllers. In today's factories, no worker is more than a boss's coffee break away from needing at least some computing skills. And now more than ever, says Knauf president Bob Claxton, the company wants to invest in the continuing education of its workers so they can keep up with new technologies--an investment that might not be worth making if those workers lack high school basics.

But the firm's requirement of a high school diploma is as much about a mind-set as it is about a skill-set, says Claxton. A diploma "shows that these applicants had the discipline to gut out a tough process," he says. "They learned how to get along with people, some of whom they may not have liked so well, in order to achieve their goals." A GED, he says, doesn't prove they can do that.

Even the dropouts who do land factory jobs can find work tougher than they thought. A relative helped Christine Harden, 18, find work in a local car-parts factory four months after she dropped out of Shelbyville High. But she has to get up at 4:30 a.m. to make the first shift every day, and she says her back is killing her. "All my friends who are thinking about dropping out, I tell them, 'Don't do it,'" she says. "This is real life out here. It's not easy."

THE LONE HOLDOUT

I met Shawn Sturgill's parents in the living room of their ranch-style home around the corner from Shelbyville's cemetery. At age 15, Shawn's father Steve, with a child on the way, dropped out of high school and then spent more than a decade battling drug abuse. He was born again six years ago, he says, patting the thick wooden cross around his neck. He has been clean since and has a high-paying job burying fiber-optic cables. But his turnaround came too late to be a model for his three older children, two of whom dropped out of school.

Shelbyville schools are performing triage on Shawn's education. For much of the day, he is in credit lab, working at his own pace to recover classes he has failed. Every afternoon he goes to the Blue River school, where he is enrolled in auto-body-repair courses.

Shawn has a tough road ahead of him. Though he will attend his class's graduation ceremony to watch his peers get diplomas, he won't be on stage, at least not yet. Even the school's efforts to speed up his credit recovery haven't been enough, so he will have to return for a fifth year at Shelbyville High. It's no fun for a 19-year-old to be in high school. Shawn is already a big guy who doesn't like to draw attention to himself.

But Shawn's hopes are bolstered by his plan. Auto-body work is not just a passing fancy for him--even when he's not at the vocational school, he is working on his Camaro, which most recently needed a new bumper. His favorite TV show, of course, is Pimp My Ride. He wants to save for tuition at Lincoln Technical Institute in Indianapolis so he can continue to develop his auto-sculpting skills. He rattles off the industry rates--car painters make an hourly wage of $22, collision techs $17--and he wants to get there. So he laughs it off every time somebody asks him in the hallway, "Hey, you're still in school? I would have thought you'd drop out by now."

Shawn's friends who have dropped out are, for the most part, struggling. A couple of them got their GED and are working in factories, but others are shuffling through menial jobs--one works at the car wash, another is washing dishes. A few, says Shawn, aren't doing much of anything except playing video games at their parents' houses. But Shawn says he is serious about not becoming a part of their dropout nation. "I've already went and put 12 years into this thing," he says. "There's no use throwing it all away."